Monday, January 30, 2012

Will Iran Kill the Petrodollar?

    Monday, January 30, 2012   No comments

by Marin Katusa, Chief Energy Investment Strategist, Casey Research

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran’s oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn’t make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar’s value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

We know where that situation led – to a US government suffocating in debt while its citizens face stubbornly high unemployment (due in part to the high value of the dollar); a failed real estate market; record personal-debt burdens; a bloated banking system; and a teetering economy. That is not the picture of a world superpower worthy of the privileges gained from having its currency back global trade. Other countries are starting to see that and are slowly but surely moving away from US dollars in their transactions, starting with oil.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. A major portion of the dollar’s valuation stems from its lock on the oil industry – if that monopoly fades, so too will the value of the dollar. Such a major transition in global fiat currency relationships will bode well for some currencies and not so well for others, and the outcomes will be challenging to predict. But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

The Petrodollar System



Sunday, January 29, 2012

Money, Politics, and Power: The Man Behind Gingrich’s Money

    Sunday, January 29, 2012   No comments

By MIKE McINTIRE and MICHAEL LUO
The trip to Jordan by a group of United States congressmen was supposed to be a chance for them to meet the newly crowned King Abdullah II. But their tour guide had a more complicated agenda.

The guide was Sheldon Adelson, a Las Vegas casino magnate who helped underwrite trips to the Middle East to win support for Israel in Congress. On this occasion in 1999, as the lawmakers enjoyed a reception at the Royal Palace in Amman, Mr. Adelson and an aide retreated to a private room with the king.

There, the king listened politely as Mr. Adelson sat on a sofa and paged through his proposal for a gambling resort on the Jordan-Israel border to be called the Red Sea Kingdom.

“This was shortly after his father, King Hussein, died, and he was grateful to me,” Mr. Adelson explained later in court testimony, recalling that he had lent his plane when the ailing monarch sought treatment in the United States. “So they remembered.”

The proposal never went anywhere — Mr. Adelson later said he had feared that a Jewish-owned casino on Arab land “would have been blown to smithereens.” But his impromptu pitch to the Jordanian king highlights the boldness, if not audacity, that has propelled Mr. Adelson into the ranks of the world’s richest men and transformed him into a powerful behind-the-scenes player in American and international politics.

Those qualities may also help explain why Mr. Adelson, 78, has decided to throw his wealth behind what had once seemed to be the unlikely presidential aspirations of Newt Gingrich. Now, in no small measure because of Mr. Adelson’s deep pockets, Mr. Gingrich is locked in a struggle with Mitt Romney heading into Florida’s Republican primary on Tuesday.


Thursday, January 26, 2012

Exploring the Dark Universe

    Thursday, January 26, 2012   No comments

by Jonathan L. Feng
A college classmate of mine went to work for a prestigious management-consulting firm right after we graduated. Every month or so he would head out to advise a different Fortune 500 company. When I ran into him a year after he took the job, I asked him how he could possibly provide insights to top business executives when these same people had often spent entire careers immersed in their company’s work. His response? “I usually have no idea how to improve these companies, but they do. And when I come into their office and close the door, they’ll say things to me that they would never tell their colleagues.”

In The 4% Universe, Richard Panek has done something similar, not with business executives, but with physicists and astronomers who are confronting some of the biggest questions in science today. Want to hear a codiscoverer of dark matter say what she truly thinks of her legendary mentor? Want to be a fly on the wall as scientific history is shaped by the backroom dealings of a good-old-boy network? Want to read the e-mails scientists send as they jockey for position in the Nobel Prize queue? Scientists usually share such information only with their closest colleagues, but it’s all in Panek’s book, and it’s placed in enough historical and scientific context to be both intelligible and riveting.

  

Wednesday, January 25, 2012

State of the Union's Foreign Policy: Unilateral Triumphalism

    Wednesday, January 25, 2012   No comments

By John Feffer

In his State of the Union address last night, President Barack Obama began with what is widely perceived to be his strong suit: foreign policy. The nation is safer under his watch, he reassured his audience, now that Osama bin Laden is gone, al-Qaeda is broken, and U.S. troops are out of Iraq. It’s too bad that the president couldn’t lead with diplomatic accomplishments to prove that the United States has reestablished a new relationship with the international community and gained a new level of global respect. Instead, President Obama felt the need to emphasize U.S. military power.

Tuesday, January 24, 2012

A Visual History of Arabian Nights

    Tuesday, January 24, 2012   No comments

by Maria Popova 
Among 2011′s best sort-of-children's books was a magnificent volume culling the best illustrations from 130 years of Brothers Grimm fairy tales -- a visual history of some of the most memorable storytelling ever published. Visions of the Jinn: Illustrators of the Arabian Nights is a remarkable tome that applies a similar lens to another infinitely influential piece of timeless storytelling, whose impact spans from the poetry of Goethe and Rilke to the contemporary fiction of Borges and Proust to the visuals and narratives of video games.

Though the first edition of Arabian Nights contained no pictures, the late 18th century saw a flourishing of illustrated editions, the first of which were almost comically amiss in their visual depictions of Arab culture, most notably a widely pirated 1714 edition with engravings by Dutch artist David Coster, who had no grasp of the cultural differences between medieval European and Islamic cultures, so he portrayed the characters in European dress, on European furniture, amidst European architecture.


The Bomb: Iran, Saudi Arabia, and Pakistan

    Tuesday, January 24, 2012   No comments

By Pervez Hoodbhoy
Once upon a time Iran was Pakistan’s close ally — probably its closest one. In 1947, Iran was the first to recognise the newly independent Pakistan. In the 1965 war with India, Pakistani fighter jets flew to Iranian bases in Zahedan and Mehrabad for protection and refuelling. Both countries were members of the US-led Seato and Cento defence pacts, Iran opened wide its universities to Pakistani students, and the Shah of Iran was considered Pakistan’s great friend and benefactor. Sometime around 1960, thousands of flag-waving school children lined the streets of Karachi to greet him. I was one of them.
The friendship has soured, replaced by low-level hostility and suspicion. In 1979, Ayatollah Khomenei’s Islamic revolution, and the Soviet invasion of Afghanistan, set major realignments in motion. As Iran exited the US orbit, Pakistan joined the Americans to fight the Soviets. With Saudi money, they together created and armed the hyper-religious Pashtun mujahideen. Iran too supported the mujahideen — but those of the Tajik Northern Alliance. But as religion assumed centrality in matters of state in both Pakistan and Iran, doctrinal rifts widened.

Friday, January 20, 2012

Egypt Brothers mix pragmatism, ideology on Israel

    Friday, January 20, 2012   No comments

The Muslim Brotherhood is trying to maneuver its way between its fierce anti-Israel ideology and the realities of governing as it ascends to leadership in Egypt for the first time in its history and faces the key question of how to deal with the country's peace treaty with the Jewish state.
The fundamentalist group's stance on the accord — opposition but not renunciation — is a telling sign of its broader style of politics. It can play down its hardline doctrine in favor of short-term pragmatism as it looks to the long term, leaves its options open and engages in a degree of double-talk to pave the way.
The stance could also reflect the group's own evolution as its new political party, whose members will be the ones actually involved in governing, gradually has to distinguish itself from the hard line of the Brotherhood itself, an 83-year-old organization whose leadership worked for decades in a hive-like secrecy because of state repression.
"The Brotherhood is in a real challenge and real crisis. For the first time, they are in power, which forces them to be rational when it comes to foreign policy because any miscalculations might blow their gains," said Khalil al-Anani, an Egyptian expert on Islamic movements.



Wednesday, January 18, 2012

Muhammad Ali at 70: What he meant, what he means

    Wednesday, January 18, 2012   No comments

by Dave Zirin
Muhammad Ali
Muhammad Ali turned 70 on Tuesday, and the three-time heavyweight champion who doubled as the most famous draft resistor in U.S. history remains larger than life in the American mind, despite being ravaged by Parkinson's disease. Two years ago, on a visit to Louisville, Ky., I was reminded why.

In a cab on the way to the Muhammad Ali Center downtown, I saw that my driver had a Vietnam Veterans of America patch on display by his license. I asked him about his experience in Southeast Asia, and he started talking a mile a minute about his time "in country," how his "happiest days" were being a sniper in Vietnam. He even said: "You might not know this, being from Washington, D.C., but the most dangerous animal to hunt is man." He then described the task in detail. He wanted to make sure I left his cab fully aware of his pride, patriotism and unwavering belief in the duty of going to war when country called.

I didn't engage the driver in a debate about Vietnam or U.S. imperialism, but given my reason for being in Louisville, I couldn't resist one question. I asked: "What do you think about Muhammad Ali? He opposed the war in Vietnam. He called it an illegal war aimed at increasing oppression throughout the globe.

"Now you're in a city where there is a Muhammad Ali Street and you're taking me to the Muhammad Ali Center. Does that bother you?"


Tuesday, January 17, 2012

Nigeria's Perfect Storm

    Tuesday, January 17, 2012   No comments

By Francis Njubi Nesbitt
Boko Haram militia member
Nigeria is facing a perfect storm of crises including a national strike, widespread protests, and sectarian violence in the north. Although the strikes, attacks, and protests raise the specter of another civil war in Africa’s biggest oil producer, the United States and the international community should avoid aggravating the situation by seeming to encourage a military solution.

Much of the violence in the north is blamed on an Islamist sect called Boko Haram, which means, “Western education is sinful.” Boko Haram emerged as a religious sect in 2002 but ramped up its antigovernment rhetoric and sectarian violence after security forces arrested and killed its founder, Mohamed Yusuf, in 2009. Hundreds of sect members died in the operation. In response, sect members killed over 800 people. Since then, the movement has adopted terrorist tactics including car bombs, drive-by shootings, and raids on churches. Its most spectacular attack was a car bombing of the UN headquarters in Abuja, the nation’s capital city in August 2010. 

  

Monday, January 16, 2012

The quiet war in Saudi Arabia

    Monday, January 16, 2012   No comments

by Joshua Jacobs*
Demonstrators in Qatif, eastern Saudi Arabia.
While western powers have been happy to use Saudi Arabia as an ally to ratchet up the pressure on Assad's beleaguered regime in Syria, it has not caught a whiff of the silent crackdown occurring within the kingdom. Since late November the protest movement which was largely snuffed out last spring has returned to the streets in force, largely centered on the oil rich and largely Shia Eastern Province.

The Saudi response was both brutal and predictable. Security forces shot and killed three protesters and wounded many more over several days of crackdowns in the eastern city of Qatif. Clashes continued throughout December as demonstrators battled security forces who routinely utilized live ammunition. In a series of retaliatory raids on the homes and districts of protest sympathizers hundreds were arrested and wounded. The killings along with the continued discrimination and mistreatment of the Shia of the Eastern Province has formed the basis of the current protest movement - a protest movement that has suffered heavily like its neighbour in Bahrain, but with little in the way of a headline.


Today, while attention was focused on the Strait of Hormuz, on Syria, and on the rising tensions in Bahrain, Saudi security forces launched an assault on the city of Awamiyah killing at least one and wounding half a dozen more. Eye witnesses have stated that soldiers on trucks opened fire on demonstrators, hitting many as they fled. The attack bears all the hallmarks of a planned operation with electricity being cut to the area prior to the assault. The area at the time of writing is apparently still under military lock-down and reflects a state of siege with clashes continuing to occur and gunfire being heard.

This attack was almost certainly condoned by the royal family and comes on the heels of a series of indictments against demonstrators and high profile invectives against the protest movement. Despite this attack and others like it, the rumblings and tremors of protest and crackdown show no sign of abatement. Indeed in the past few months they have once again reared their head in the south west in Najran and Jazan, compounded with protests over women’s rights in Riyadh and Buraydah.

These protests bear all the hallmarks of a movement which could coalesce and burst anew from the ashes of the disjointed and largely suppressed protests of last spring. They also come at an extremely troubling time for the kingdom. The death of Crown Prince Sultan highlighted the geriatric character of the upper echelons of the ruling family, and the potential uncertainty and disquiet surrounding the issue of succession. Meanwhile, continuing tensions in the Strait of Hormuz and rising furor on the streets of Bahrain open up the risk of unrest spreading to the kingdom in a domino effect. Indeed the extremely aggressive Saudi position on Bahrain and the continued quartering of troops in the tiny island monarchy has a direct relationship to their fears of domestic instability. The possibility of Saudi Shia rallying on behalf of their co-religionists in Bahrain, or vice versa is a looming threat that the Saudis are taking great pains to neutralize.

Though the protests currently centre on a single province, the Eastern Province is home to the majority of Saudi energy reserves, terminals, and processing facilities. Disruption and upheaval in this province has a disproportionate impact on Saudi Arabia. A protracted and visible uprising would not only weaken the Saudi government internally but could have a tumultuous impact on the global energy market. This is all the more reason for not only the media, but for western governments to begin taking an active interest in the ongoing street conflict.

Saudi rulers certainly understand the threat posed by the protesters and the risk of an expanding movement: their actions are a testament to that fact. So why is the world’s media apparently incapable of recognizing the same thing? Arab media has been noticeably silent, with the two largest Arab media entities the Saudi-owned al-Arabiya and the Qatari-owned al-Jazeera having said almost nothing. However there is little excuse for western media. Saudi Arabia is probably America's most important Arab ally, the world’s most important single energy node, and one of the most influential countries in the region. It's also experiencing its worst domestic upheavals since its rebellions of the early 1980's. Taken in a vacuum this is a significant news story. When set against the context of the unfolding drama in the Gulf and the wider contours of the Arab Spring, it is incredible.

The past year was a bad one for Saudi Arabia: the coming year augurs to be even worse. The time has come to slice through the veil Saudi Arabia has kept around its crackdown and recognize that the Arab Spring at least in limited form has hit the kingdom. What comes next is difficult to say, but with the rapidity of change that the Arab Spring has introduced us to, it would be wise to pay close attention to the warning signs as they appear. It is entirely possible that we will see a very, very, warm spring in Saudi Arabia.
___________
*Joshua Jacobs is a Gulf Policy Analyst and published columnist at the Institute for Gulf Affairs.

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